Many investors will be drawn to the ‘usual suspects’ for their dividend fix, namely FTSE 100 companies. However, I think looking further down the market spectrum can also be a good idea. Here are three less-well-known shares I’d be prepared to buy today.

Liontrust Asset Management

Like many other listed companies, fund manager Liontrust (LSE: LIO) hasn’t had the greatest of starts to 2022. Actually, that’s an understatement. Its share price has now tumbled 24% year-to-date, most likely due to concerns that profits will fall due to people pulling their money out of the market. 

That’s said, it’s still up 34% over the last 12 months. And, of course, the beauty of investing for dividends is that I can take such volatility in my stride so long as the passive income keeps rolling in. 

Importantly, Liontrust has consistently hiked its annual payout by a double-digit percentage for many years. Analysts have the company returning 64.1p per share in the current financial year. At today’s share price, that equates to a yield of 4%. It’s also sufficiently covered by profits, making a cut unlikely.

That said, investors need to be aware that the fund management industry is notoriously competitive and there’s always a risk Liontrust may need to cut fees to help retain clients.

Redde Northgate

Redde Northgate (LSE: REDD) provides “mobility solutions and automotive solutions” to businesses. It also strikes me as a great source of dividends.

The £1bn-cap company looks set to return 19.4p per share to holders in FY22, giving a chunky yield of 4.9%. This should help holders to keep up with rising costs. Like Liontrust, the payouts are safely covered by expected earnings. With the exception of 2020, Redde Northgate is also a regular dividend hiker. 

The shares aren’t exactly expensive either, changing hands for nine times forecast earnings. That’s despite the company’s value rising 45% over the last 12 months!

I suppose one thing to bear in mind here is that Redde Northgate may need to replenish its fleet of vehicles every now and then. That could end up reducing margins significantly, especially at today’s prices.  

Synthomer

Chemicals firm Synthomer (LSE: SYNT) is a final secret stock offering a tempting dividend yield. It’s a leading supplier of aqueous polymers that are used in things such as latex gloves.

Just like the aforementioned asset manager, Synthomer’s share price has been on a downer since the beginning of 2022. In the last 12 months, it’s fallen 22%. On a positive note, this does leave them looking cheap at just seven times expected earnings. 

Unfortunately, the dividend is expected to fall by 22% this year. However, I’m including it here for two simple reasons. First, the yield is still expected to be 5%, which is a far more passive income than I’d get from a cash savings account. Second, this payout looks thoroughly secure based on predicted profits. 

Similar to Redde Northgate, a risk with Synthomer is that supply chain hold-ups may impede growth. This may explain why the shares have been out of form recently.

Notwithstanding this, the vast majority of brokers covering the company remain positive. This suggests now might be as good a time as any for long-term investors like me to load up.

The post 3 secret inflation-busting dividend stocks to buy for passive income appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Synthomer. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The best shares to buy for income, at least in my view, aren’t those offering the highest payouts. It’s those where dividends are consistently growing that I’d be inclined to invest in. Here are two examples. 

Rising income

Fund manager Liontrust (LSE: LIO) has been hiking dividends by double-digits for years now. It’s done it again today on the back of a great set of full-year numbers. 

Adjusted pre-tax profit jumped 69% to £64.3m over the year to the end of March. On a statutory basis, it more than doubled from £16.5m to £34.9m.

As a sign of its growing popularity, net inflows also jumped 30% to £3.5bn over the period. At the end of March, Liontrust had £30.9bn in assets under management and advice — up 92% on the previous year. Last Friday, this was £33.3bn.    

And those dividends? Today, Liontrust announced it would pay holders a total of 47p per share for the full year. This is up a massive 42% on that returned in 2020 and equates to a trailing yield of 2.8%.

All told, the dividend has now grown an average of 33% per annum since 2017. This is indicative of a very healthy company, in my view. I’d much rather have this than be promised a huge payout by a company that, due to poor trading, never materialises. This is why I think the £1bn-cap could be one of the best shares to buy for income today.

Looking ahead, Lionstrust is hoping to capitalise on the interest in sustainable investment by launching its ESG Trust in July. Importantly, this new vehicle will feature small-cap stocks that most funds shy away from. Assuming this proves a successful strategy, I suspect dividends will continue rising from here.

Another dividend hiker

A second company that’s been consistently raising its dividends is self-storage firm Safestore (LSE: SAFE).

Earlier this month, the company reported a “very strong performance” over the first half of its financial year. As a result, Safestore has predicted that full-year earnings will be “at least at the top end of its previous guidance.” 

All this should be good news for the dividends. Right now, analysts are predicting a 54% jump in the final payout for FY21 (22.9p per share). Based on today’s share price, that becomes a yield of 2.4%.

Again, investors could get a lot more elsewhere. However, these dividends might not be growing at the same clip, if at all. A stagnant income stream isn’t encouraging.

So, taking into account its fairly predictable earnings stream and encouraging store pipeline, I think Safestore is another one of the best shares to buy if I were looking for an increasing income stream.

Never risk-free

Naturally, dividend hikes are based on trading. And by its very nature, trading at any business will fluctuate from year to year. As such, no income stream is too strong to be cut when the going gets tough. This could be the case even for Liontrust and Safestore. Neither are completely immune to macro-economic setbacks.

This is why I think it’s important to ensure that my portfolio is appropriately diversified. In practice, this means holding a bunch of stocks from different sectors. Doing this would allow me to kick back and not get flustered with day-to-day market wobbles.

The post The best shares to buy now for rising dividends appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Penny stocks: What’s on my radar

Perhaps the most important is the company’s financial position. A penny stock that’s already swimming in debt is one to avoid, unless it has significant assets to offset this. A struggling firm will usually need to tap its owners for more cash by offering shares on the cheap. By contrast, a company with net cash on its balance sheet should have the firepower to weather a few inevitable storms.

A second thing I look for is a reason (or reasons) why the shares might be ready to rise in value. As much as I invest for the long term, I don’t want to be in a stock that has little chance of growing revenue and profits. The opportunity cost of not investing elsewhere is simply too great. I therefore take a look at recent announcements to gauge whether it could be about to sprint ahead of the competition. 

Third, I look for evidence of volume. In other words, I need to see that the shares are changing hands (aka liquidity). Should this be the case, I can be more confident of being able to sell my holding when I want/need to. A lack of interest in certain penny stocks could make it difficult to shift them for the price I want.  

Another thing I look for is the number of shares owned by directors. If someone helping to manage the firm isn’t confident enough to invest their own money, why should I? Having a healthy slab of shares sends a message to would-be buyers that their interests are aligned with shareholders.

A final, more general point I consider when selecting penny stocks is to look across the entire market. Focusing on one sector, such as mining or biotech, is just too dangerous.  

An alternative strategy

An alternative to buying individual high-risk, high-reward penny stocks is to buy a fund specialising in this part of the market. Sure, not every holding will actually have shares trading for pennies rather than pounds, but this isn’t the point. The objective here is to diversify risk through buying a basket of stocks. The eventual return might not be as great but investing this way does allow me to sleep at night. 

Positively, there’s no shortage of active funds to select from. Like penny stocks however, the performance varies wildly. This is why it’s important to scrutinise the track records of those managing investors’ money. We’re talking evidence of consistent returns over five years or more here, not one or two months.

I currently have a number of such funds in my portfolio. These include the Liontrust UK Micro-Cap Fund and the Marlborough UK Micro-Cap Growth. Penny stocks in the former include Totally and Eckoh. The latter includes companies like Jubilee Metals.

Although there’s no guarantee that returns to date will continue, I’m content to keep my money invested here for the long term.

The post Here’s how I buy penny stocks appeared first on The Twelfth Magpie.

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Paul Summers owns shares in Liontrust UK Micro-Cap Fund and Marlborough UK Micro-Cap Growth. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Why it pays to go small

There are several reasons why smaller companies have historically outperformed their larger market peers.

First, high-quality small-caps can grow revenues and profits at a faster clip. This makes it easier for a company with a market-cap of, say £100m, to double in value. A company like FTSE 100 oil giant Royal Dutch Shell however, will take far longer to double, if it happens at all.  

Second, the vast majority of analysts in the City spend their time pouring over the latest figures from the best-known companies on the London Stock Exchange. As a consequence, many promising, junior UK shares rarely appear on their radars. This is clearly a good thing for the nimble private investor since these stocks are more likely to be mispriced. 

Third, professional fund managers are often prevented from buying these companies even if they’re aware of how good they are. This underlines the benefits of learning to manage one’s own investments, assuming the time and inclination. 

Be warned

Now, let me be clear. Small-cap investing isn’t for everyone. In fact, there are reasons why some people might want to steer clear entirely. 

First, share prices can be extremely volatile. This is usually because these stocks tend to be harder to buy or sell quickly. That’s not necessarily a problem when markets are behaving themselves. However, it’s a potential disaster in the event of a market crash. Last year showed it’s possible to lose a great deal of money (at least on paper) in a very short space of time.

This brings me to my second point. To be more confident about getting a great return from small-cap UK shares, patience is required. Again, this might not be a problem for those with decades of their stock market journey left. However, older investors may not be quite so flexible. This is particularly the case if they’re approaching retirement, or have already quit the rat race. 

Does this mean it’s impossible to make good money without taking on insane levels of risk? Actually, no. There are ways of mitigating this.

Ways to reduce risk

Aside from ensuring I’m not overly invested in any one company and being extremely wary of ‘penny’ stocks, I also own a number of actively managed funds investing in this space. While the fees are unquestionably high, I believe the eventual return should be worth the expense. 

As an example, I’m currently invested in the Liontrust UK Smaller Companies Fund. Managed by Anthony Cross and Julian Fosh, this fund has returned over 1,600% since 1998. Seen from this perspective, multiplying the portion of my capital invested in small-cap UK shares 20-fold in the next 30 years (my personal investing horizon) might actually be possible! 

Sure, 2020 showed that the path to riches certainly won’t be without a few setbacks. However, so long as I can steer clear of meddling with my portfolio too often,  I’m confident the rewards will be worth it. 

The post £1,000 to invest? Here’s how I’d look to make £20,000 using UK shares appeared first on The Twelfth Magpie.

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Paul Summers owns shares in Liontrust UK Smaller Companies Fund. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Taking this on board, I think anyone in the position to continue investing in the top tier over next few months should do so.

But while a cheap exchange-traded fund is perfect for those desiring a fuss-free approach, this strategy won’t suit everyone. Those wanting to outperform the market (be it the FTSE 100 index or something else) will need to pick their own stocks, get others to do it for them, or a bit of both.

Personally, I’m in the third camp. Today, I’m going to cover two funds I’ve been adding to my own portfolio lately.

Making a splash

Set up by Hargreaves Lansdown founder Peter Hargreaves and Stephen Yiu, the LF Blue Whale Growth fund invests in a concentrated portfolio of 25 large-cap, mostly US-based stocks. Tech titans Amazon, Adobe and Microsoft are some of the largest holdings.

While manager Yiu has a penchant for tech stocks, there are some things he definitely won’t buy. Like fellow fund managers such as Terry Smith, Yu also won’t have anything to do with cyclical companies such as those in the oil and gas or mining spaces. He’s also wary of banks and pharmaceuticals. Many such businesses feature in the FTSE 100.

Blue Whale aims to outperform similar funds every 12-month period, which it has since launch in September 2017. From here to the end of April this year, it had returned 46.3% compared to its sector average of 11.8%. Encouragingly, the fund is also up 2.6% in 2020 so far. The sector average is down 7.1%.

Naturally, it’s still early days. The real test for Yiu is whether he can sustain this performance over the medium-to-long term. If he can, we could be looking at a potential rival to Fundsmith’s crown. At £300m, there’s certainly lots of room left to grow. 

Likely FTSE 100 beater

A second fund likely to generate far better returns than a FTSE 100 tracker is Liontrust UK Smaller Companies.

Some may consider buying such a fund very risky when the outlook for small businesses is especially bleak. Even if a second wave of the coronavirus is contained, the economic wounds sustained so far will take time to heal. There’s also Brexit to think about.

The importance of focusing on the long term, however, can’t be overstated.  Research has consistently shown that investing in minnows can deliver exceptional outperformance over the long term, certainly compared to the likes of the FTSE 100. Given this, it surely makes sense for younger investors to have some exposure.

Yes, it’s expensive to hold compared to your typical top tier tracker (the annual management charge is 1.25%). On the flip side, performance over the years suggests the Liontrust team members earn their pay.

In the last five years, the fund has delivered a near-84% return compared to the sector’s 26%. It’s also fared better over the last three months of market mayhem (-12% compared to -22%).

If you can trust yourself not to meddle and can handle the volatility, I feel confident this fund will prove a long-term winner.

The post The FTSE 100 still looks great value but I’m buying these top funds instead appeared first on The Twelfth Magpie.

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Paul Summers owns shares in LF Blue Whale Growth and Liontrust UK Smaller Companies. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

If you had invested £1 in the UK’s smallest companies in 1955, for example, your money would have grown to an astounding £15,213 by January 2019, compared to the £991 generated through the FTSE All-Share Index (Numis, 2019).

Wow! What gives?

There are a number of factors that explain this outperformance.

First, what tiddlers lack in scale they make up for in nimbleness. It’s much easier for a minnow to adopt a new strategy that could dramatically improve revenue and profits than it is for a lumbering FTSE 100 giant.

Second, smaller firms operating in markets ripe for disruption can quickly steal market share from those who have been established for a while and may take their customers for granted. 

Last, small companies are often at the cutting edge, allowing them to offer new products to consumers/clients before the heavyweights get involved. 

Taken collectively, these reasons are why I think patient, young investors should contemplate getting some exposure.  

Where do I sign?

Hang on! Clearly, this kind of return doesn’t come without a few caveats.

First, past performance is no guide to the future. Investment professionals are obligated to highlight this to clients because, well, it’s 100% fact. History can provide some guidance but, ultimately, no one knows what returns will be like in the years ahead. 

Second, few of us will be able to stay in the market for over six decades. Many self-proclaimed ‘long-term investors’ have trouble holding the same stocks for more than a few months before selling and moving on! 

Third, small- and micro-cap investing is high risk and only appropriate for those who can stomach the inevitable ups and downs. Vastly more businesses fail than succeed, hence the need to know what you’re doing. 

Given the above (and lack of relevant passive trackers to invest in), I think the best solution is to let a professional money manager sort the wheat from the chaff and, for once, earn their (high) fees.

Some examples

One of two funds that feature in my own portfolio is the Marlborough UK Micro-Cap Growth fund, managed by veterans Giles Hargreave and Guy Feld. Almost half of the fund is made up of stocks with valuations of less than £250m. 

Performance over the long term (which is what we should really be interested in when judging manager skill) has been excellent. From the end of January 2010 to January 2020, for example, the fund returned 370%. The sector average was 246% and the FTSE All-Share returned 60%. 

Another fund I own is Lionstrust UK Micro-Cap, managed by Anthony Cross, Julian Fosh, Victoria Stevens, and Matt Tonge. At less than four years old, it’s too early to comment on performance over the long term. However, I’m cautiously optimistic given the stonking total return of 1,432% achieved since inception to December 2019 by Liontrust’s UK Smaller Companies fund (compared to the sector average of ‘just’ 705%).–

In 2019, the UK Micro-Cap fund achieved a total return of 29.1% compared to the sector average of 25.3%. Even more impressive, in my view, is the fact that the same fund achieved a gain of 3% compared to an average loss of 11.7% in 2018. This highlights how hiring good stockpickers can pay off in both good and not-so-good years.

The post Small stocks can make big money. Here’s the proof! appeared first on The Twelfth Magpie.

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Paul Summers owns shares in Marlborough UK Micro-Cap Growth and Liontrust UK Micro-Cap. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

With this in mind, here are three market minnows that have all been setting new share price highs recently. 

High flyers

£220m cap scientific instruments business Judges Scientific (LSE: JDG) has been in excellent form of late, rising 46% since January. If 2018’s numbers are anything to go by, there could be more to come.

Thanks to strong demand and foreign exchange tailwinds, revenues grew 9% (5.5% of which was organic) to a record £77.9m last year and adjusted operating profit jumped 35% to £14.7m.   

According to Chairman Alex Hambro, the new financial year has “started well” and the firm is “well positioned to face the uncertain macro and political climate“. The recent 25% hike to the total dividend backs this up this statement. 

Assuming analysts are correct in predicting a 23% rise in earnings per share in 2019, Judges’s shares are changing hands on a P/E of just under 19. With rising returns on capital and improving free cash flow, I rate the shares as a cautious ‘buy’.  

Despite its memorable ticker, I still think music hardware and software product supplier Focusrite (LSE: TUNE) is a company that the majority of retail investors won’t have heard of. Considering its share price is now over 70% higher than it was two years ago, however, this market leader is clearly getting more attention than it used to. 

It’s not hard to see why.

April’s half-year figures (covering the six months to the end of February) included a 4.1% rise in revenue to £40.4m and a very encouraging 22.6% jump in pre-tax profit to £7.2m. The interim dividend was lifted 20% and the company had net cash of a little over £26m on its balance sheet at the end of the period. 

Trading on 29 times forecast earnings, prospective buyers of Focusrite’s stock will need to be confident that management’s strategies to deal with import tariffs in the US and ongoing economic and political uncertainty will be sufficient to stop the share price losing momentum. A number of product launches planned for this year should also help.

That said, I wouldn’t be tempted to jump on board at this price. For those already holding, banking some profit feels prudent.

Liontrust Asset Management (LSE: LIO) is my final pick of firms whose shares are hitting all-time highs. 

Despite some in the industry experiencing problems of late, shares in the business have been solidly rising for the last three years. Had you purchased Liontrust back in June 2016, you’d have a stonking gain of around 180% now.

As my Foolish colleague Harvey Jones reported recently, the company’s latest set of results were certainly encouraging considering “recent market bumpiness“. 

Compared to peers, Liontrust’s shares still look reasonably priced on 14 times predicted earnings. A forecast 3.9% yield makes it the highest dividend payer of the three covered today and it also has net cash on its balance sheet. 

While nothing can be guaranteed when it comes to future performance, particularly for companies whose success is so reliant on general market sentiment, I reckon the shares could be another cautious buy.

The post 3 under-the-radar small-cap stocks hitting all-time highs. Buy, hold or sell? appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Focusrite and Judges Scientific. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Serco, so good

International service company Serco Group (LSE: SRP) has done far better with its share price, up 37% in the last 12 months. It’s up another 4% today after its trading update for the first half of 2019 showed 20% growth in underlying trading profit and 6% for revenues.

Serco also reported a £3bn order intake, including the award of its largest-ever contract, with AASC. 2019 will be the third year in a row in which order intake exceeds revenues.

Top end

The share price also benefited as it reported FY19 revenue is expected to be around the top end of the previously-stated range of £2.9-3bn, while underlying trading profit guidance was maintained at around £105m.

Group CEO Rupert Soames said the £1.73bn FTSE 250 company enjoys the “strategic advantage of having a strong international footprint” with 4% organic growth driven by the Americas and Asia Pacific divisions. Its UK division posted an improved trading performance, boosted by the Carillion health facilities management acquisition completed in 2018.

Fighting back

There’s one “but” though. When Rupert Hargreaves looked at Serco stock in February, he concluded it was too expensive, trading at a vastly optimistic forward P/E of 19.9, and feared that even a slight disappointment in earnings could punish the share price. Now it trades at a whopping 24.8 times earnings, making it even more expensive.

Soames has done a great job of turning Serco around since his appointment five years ago, when the group was struggling. He’s returned the company to growth and driven through plenty of M&A activity, and deserves plaudits. The downside is that it looks a bit pricey, plus there’s no dividend.

Liontrust roars

Fund manager Liontrust Asset Management (LSE: LIO) has also had a good spell, its stock up 26% in the past six months. But it’s flat today despite impressive final results showing a 10% rise in adjusted profit before tax to £30.1m and record inflows of nearly £1.8bn.

Revenues also rose 10% to £85m while profit before tax rose a bumper 55% to £19m, helped by a £4m drop in costs to £11.1m. Record net inflows for the year to 31 March totalled £1.78m, up from just over £1bn last year, particularly impressive given recent market bumpiness. CEO John Ions said “a 21% increase in assets under management emphasise another successful year for Liontrust.”

He pinned this success on building an impressive group of investment teams, along with “a great distribution franchise and a strong and distinctive brand.” Lionstust has always been respected by the brokers I talk to (mind you, so was Neil Woodford). 

Watch it

The share price is a bit less toppy than Serco’s at 13.5 times earnings and investors get a 3% yield and a progressive management attitude as well, with the total dividend per share lifted 27%.

Edward Sheldon also rates this small-cap champion, whose market-cap is just £367m. He even suggests it could be a takeover target. Fund managers are highly exposed to stock market fortunes. Maybe one to stick on your watch list for the next dip?

The post One FTSE 250 stock and one small-cap I’d consider buying with £2,000 appeared first on The Twelfth Magpie.

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• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

As a result, there’s been considerable consolidation within the sector in recent years as firms have acted to strengthen their market positions and boost their margins, and this is a trend that looks set to continue. With that in mind, here’s a look at two highly profitable niche asset managers I think could be takeover targets.

Impax 

Impax Asset Management (LSE: IPX) focuses on sustainable investing which seeks to consider both financial return and social/environmental good. Founded a little over 20 years ago, the group offers a range of thematic and unconstrained global equity strategies as well as real asset funds focused on the growth opportunity arising from a sustainable economy.

It’s this niche focus I believe makes Impax a prime takeover target as public interest in issues such as climate change and environmental protection is increasing and the demand for sustainable investments is on the rise. Impax, which has won awards for its sustainable investing in the past, could be a great fit for a larger asset manager looking to boost its presence in this area, in my view.

Impax has grown significantly over the last decade and today’s half-year results show further progress. The group enjoyed inflows of £887m over the six months to 31 March, boosting assets under management by 6% to £13.3bn, while revenue and profit before tax jumped 32% and 69%, respectively.

Moreover, in a statement of confidence from management, the interim dividend was hiked 36%. Chief executive Ian Simm commented: “Impax’s specialist expertise as investors in the transition to a more sustainable economy is resonating with a range of asset owners around the world, and the company remains well placed for further growth.”

Impax shares have fallen on today’s results, but I would view any share price weakness as a buying opportunity. The shares are not particularly cheap (forward P/E of 25), but given the growth story, I think they deserve a premium.

Liontrust

Another asset management company I think could be a takeover target is Liontrust (LSE: LIO), which runs a range of specialist investment funds and also has a focus on sustainable investing. It had just under £13bn in assets under management at 31 March.

While many other asset management companies have been struggling recently, Liontrust has been thriving. For example, for the year to 31 March, the group enjoyed record net inflows of £1.8bn, which boosted its assets under management by 21%. This is a particularly strong performance given the UK asset management industry as a whole experienced negative retail fund flows in six out of the seven months to the end of February.

Liontrust shares currently trade on an attractive P/E of just 13.2 which I think could increase the group’s takeover appeal. There’s also a healthy yield of around 4% on offer right now. Overall, I see considerable investment appeal in this small-cap champion.

The post Two FTSE 100-beating dividend stocks I think could be takeover targets appeared first on The Twelfth Magpie.

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Edward Sheldon has no position in any shares mentioned. The Motley Fool UK has recommended Liontrust Asset Management. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Niche manager

This company has carved out a niche for itself in the asset management business over the past 20 years managing sustainable funds, a rapidly expanding part of the market.

At the end of the first quarter, the company reported an increase in assets under management of 21% year-on-year to £12.7bn, with net inflows for the financial year to the end of March totalling £1.8bn. Considering the fact that the rest of the active asset management industry is struggling to attract assets away from passive fund managers such as Vanguard, these impressive fund flows stand testament to Liontrust’s investment proposition.

As the business has expanded, investors have been well rewarded. The stock has risen five-fold since 2012 as net profit has jumped from a loss of £4m to profit of £25m (estimated for 2019). At the same time, Liontrust’s per share dividend has risen from 1p to 21p and analysts are expecting this trend to continue, with dividend growth of 15% pencilled in for 2019, and 11% for 2020, giving the stock a 2020 dividend yield of 4%.

Supply vs demand

Another firm that I think you should consider for your income portfolio today is homebuilder Bellway (LSE: BWY). With a dividend yield of 5% at the time of writing, this company immediately stands out as a dividend champion. What’s more, the payout is covered three times by earnings per share, and the enterprise has a zero debt, cash-rich balance sheet, which only adds to its appeal in my view.

The UK is facing a chronic housing shortage, and homebuilders like Bellway are struggling to match demand. It is unlikely this supply/demand mismatch will end any time soon and, as a result, I think it is highly likely that homebuilders will continue to churn out impressive profits for the foreseeable future.

I think Bellway is one of the best investments to play this trend because, not only does the stock support a dividend yield of 5%, it is also trading at a deeply discounted valuation of just seven times forward earnings compared to the sector average of 10.5. This valuation gap tells me investors could see both impressive dividends and capital gains in the years ahead. What’s not to like?

Market leader

The final dividend king that I think is worth buying and holding forever is M&C Saatchi (LSE: SAA).

The best investments tend to have a strong brand and durable competitive advantages, and Saatchi is one of the most influential brands in the marketing world. This year, analysts are forecasting a 144% increase in earnings to 22p, which puts the stock on a forward P/E of 17. Earnings per share could expand a further 5% next year according to current City estimates, leaving the stock trading at a 2020 P/E of 16.1.

Saatchi stands out when it comes to the company’s dividend. Over the past five years, the dividend has grown at an average annual rate of 15% and has doubled since 2018. Right now the shares support a dividend yield of 3.2%, and the distribution is covered 1.9 times by earnings per share. According to these numbers, if the payout continues to grow as it has done during the past five years, investors buying today can look forward to a dividend yield of 6.4% by 2024.

The post 3 top dividend kings I’d buy and hold forever appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Liontrust Asset Management. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.